What are Mergers and Acquisitions (M&A)?
Mergers and Acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect of strategic management, M&A can allow enterprises to grow or downsize and change the nature of their business or competitive position.
Top 5 M&A Considerations
This list provides the five things that entrepreneurs need to consider before entering into an M&A transaction. It is too often that clients come to us with legal issues after entering into a problematic business transaction, taking these steps before you enter into a transaction will make for a more successful venture.
1. Misrepresentations: Entrepreneurs need to be sure and verify the identities of the people and businesses they transact with. Verification can be done through a legal search or through the Secretary of State’s website.
2. Legal Disputes: Ensure that you are aware of any ongoing or prior legal disputes with the person/company you are contracting with, including litigation, settlements, government-imposed penalties, or any other issues of this nature.
- We can typically find this information by searching the name of the person or company through the District Court’s civil records website, third-party search agencies, the Secretary of State’s website, and Google.
3. Financial History: It is important to consider the company’s financial health before making any commitments. We recommend having the company’s tax returns, financial statements, and credit reports reviewed by a licensed CPA.
4. Reputation: It is important to consider the company’s position or former owner’s position in past transactions and agreements. You do not want to be involved with a party that could taint your reputation.
5. Contracts: When drafting contracts, discuss what is the best type of legal document that will meet your end goal. Depending on the nature of the transaction, an investment agreement, asset purchase agreement, or even a promissory note might be the best option. A contract can protect you and your partner in case of any issues. Consult with an attorney that specializes in Corporate Law to ensure that your transaction covers both you and your merger or acquisition.